The Economy is in a mess and the home buyers in a fix whether to purchase a property or not? Wait for a real estate prices to settle in or home loan interest rate revision? The banks and Housing Finance Companies (HFCs) understand this and they have devised new methods to lure the hesitant property buyer. The banks have decided not raise the home loan interest rates but increase the payment tenure to facilitate buyers.
Everyone dreams to acquire a house and there exists a huge gap between the demand and supply of houses. This gap creates a scenario where the prices of property get higher and only a few those who can afford to spend more are able to purchase houses and own a property.
A salaried person who wants to own a house has to take a home loan and without it he cannot buy a house for himself and his family. Majority of houses bought are via the help of home loans and it has become a huge industry for the banks that lure customers to purchase property through them.
The Great Economic Recession of 2008 was a result of prime mortgage loans dispersed by American and European banks to home buyers/companies without checking their paying back capacities. This resulted in a situation which saw that most of the money was given in loans and banks were empty with no paybacks or repayment of home loans.
But that is not the case with Indian banks. Not only the home loan criteria are tight here but also the banks ensure that the payment of home loans is timely. Though after the opening up of the Indian markets to the foreign banks, the competition to lure customers among banks increased manifold and they started competing with each other to have more customers. But the basic rules to grant a loan remained tight and hence that saved the Indian Economy from a banking crisis in 2008.
Even now, after witnessing a dip in growth of Economy, the banks have managed themselves well and have very less Non Performing Assets (NPAs), which are losses to the banks. Indian banks only have 1 to 2 per cent of total revenue as a NPA which is keeping them in good stead.
Looking at the economy and the imminent stagnation in the loan industry, the banks have devised a way ensure that home buyers and customers keep taking home loans and they too do not face losses or lose a customer.
For the same they have proposed to increase the home loan tenure and are readying to give loans up to the age of 65 to 70 years. Seen as a radical change by the conventional bankers, the times demand this change.
Bank know that they cannot increase the home loan rates or the value of EMIs for the home buyers, as this would not only drive them away but also produce a lot of defaulters in the system who have taken home loans. The banks realize that they have to share the burden of a flagging economy and cannot pass the buck totally to the customers by increasing the EMIs or upping the home loan interest rates.
Home loans are at the moment suspended between 9.95 per cent to around 11.25 per cent, and the banks know that the middle class is already burdened with high inflation in food items, FMCG, Fuel prices, Travel prices, etc. and they cannot further burden them. Hence the new idea and new mechanism has been brought in course. Banks are sure that the stringent home loan rules will ensure genuine and stable buyers.